O2 Dunne good

Ask Telefónica O2 UK chief executive Ronan Dunne about the effects of the global economic slowdown, and he draws a blank, or at least feigns to.

“I am the worst person to ask about the state of the market because what we’re experiencing is not being reflected elsewhere,” he says.

“Footfall is down across all [retail] segments. But we’re not seeing that [in our channels].”

O2 has bucked the trend in UK retail during the past three months, and outrun its competitors for 12 quarters on the spin.

It added 401,778 mobile customers to its base in the quarter ended September 30, and 72,870 fixed broadband customers – more than its three main rivals combined, well over half its total mobile additions for the year to date, and just under half its fixed broadband additions.

It was the only network to record prepay subscriber growth in the period, and did so largely without the iPhone 3G available on prepay.

“In a simple list, we are number one for customer numbers, net additions, churn and profit,” remarks Dunne.

O2 UK’s year-on-year revenue growth was 8.7 per cent for the quarter; UK revenue was £4.5 billion, up 10.7 per cent for the nine months to September 30.

Profit (EBITDA) came in at £380 million for the quarter, at a margin of 26.5 per cent of total revenues – by comparison, Vodafone reported £316 million profit and a margin of 23.2 per cent and T-Mobile reported £175 million and a 22 per cent margin. Orange UK did not report profits within France Telecom figures.

Dunne swats away claims, doing the rounds since half-way through last quarter and vehemently denied (of course) by O2 UK, that parent Telefónica has put it “under restraint” until the new financial year as a result of its budget-busting run-rate through Q3.

Certainly, returns on late 2007/early 2008 additions appear good and the UK iPhone 3G rush hasn’t caned UK acquisition costs as suspected, probably in part because it has been offset by incremental SIM-only revenue.

“Just do the maths. We have made more money, generated more cashflow than anyone else. We have more money than any of them,” says Dunne.

“We are bang on target. There are no artificial constraints on us at all. We will remain consistent, even when others turn volume on and off.”

He adds: “The biggest key to it is consistency and how hard we have worked in a commoditised, saturated market.

“We have a strong brand and we are in the market every single quarter with good propositions, over-laid with four years of unbroken quality for customer satisfaction with our products and service. It only works when everything works.”

Speculation Telefónica is squeezing the UK business to January 1 for its Latin American adventure is also, apparently, wrongheaded. Dunne claims management of UK costs and returns is right on the money; that O2 UK is, now, where it wanted to be when it submitted its 2008 roadmap.

“Of course, we have to respect the fact we’re part of a group. But we set out our budget plan for the year and we are nailed on to deliver that plan. But, of course, any business in any group is allocated a budget. And we work to that,” he explains.